Charitable Giving From an IRA: Why the Transfer Method Can Change Your Taxes

If the money is sent the wrong way, or too late, the tax benefit can disappear. Four rules determine whether a qualified charitable distribution counts.

The IRS increased the annual cap on qualified charitable distributions, or QCDs, from $108,000 to $111,000 for 2026.

A QCD moves money from an IRA directly to a charity. It can satisfy part or all of a required minimum distribution without being included in taxable income.

Required minimum distributions, or RMDs, start at age 73. A QCD can begin earlier, but the IRA owner must be at least 70½ on the day the distribution is made.

Anyone already subject to RMDs must meet the annual deadline of Dec. 31. Missing the amount can trigger a 25% excise tax, though that drops to 10% if the shortfall is corrected within two years.

How a QCD must be set up

• The funds must go directly from the IRA trustee to a charity that can receive tax-deductible gifts. Donor-advised funds and supporting organizations do not count, and withdrawing the money first and donating it later does not qualify.
• The distribution must come from an IRA. Active SEP and SIMPLE IRAs are not eligible, and money held in a 401(k) does not qualify while it remains in that plan.
• The account owner must be at least 70½ when the distribution is made.
• The amount can be counted toward that year’s RMD, up to the annual limit.

The key date is the transfer date, not the plan to give

A charitable distribution is reported on Form 1099-R for the calendar year in which it is completed. If the transfer happens in January, it counts for the following year and does not reduce the prior year’s RMD. The one exception is the first-year RMD, which may be delayed until April 1 of the next year.

Custodians can differ on how long a transfer or mailed check takes to process. Asking for the cutoff date well before the end of the year can prevent a costly mistake; waiting until the final days of December can mean paying a penalty.

No double tax break, and a note on Form 1040

A QCD that is excluded from income cannot also be claimed as a charitable deduction. Because Form 1099-R shows the full distribution, the full amount is entered on line 4a of Form 1040. If the entire distribution was a QCD, line 4b shows zero taxable income, and the QCD box on line 4c is checked.

Since the distribution never becomes income, it also reduces modified adjusted gross income. That can matter for the $6,000 bonus deduction available to people age 65 and older, which phases out above $75,000 of modified adjusted gross income, or $150,000 for joint filers.

When the amount given affects the larger retirement plan

How much to donate, and from which account, can affect the rest of a withdrawal strategy, including RMDs, taxable income, Roth conversions and Social Security timing. A QCD is also a retirement move that cannot be reversed once the money leaves the account.

Whatever the size of the gift, ask your IRA custodian for its QCD request form and its cutoff date before the holiday season begins.